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Islamic economic jurisprudence
Islamic economics refers to the has been called a field of literature that "identifies and promotes an economic order that conforms to Islamic scripture and traditions," and in the economic world an interest-free Islamic banking system. The literature originated in "the lates 1940s, and especially" after "the mid-1960s.""The economic system in contemporary Islamic thought: Interpretation and assessment", by Timur Kuran, International Journal of Middle East Studies, 18, 1986, p.135-164 The banking system developed during the 1970s.Islamic Economics and the Islamic Subeconomy by Timur Kuran, Journal of Economic Perspectives, 1985 Islamic economic literatures' central features have been called "behavioral norms" derived from the Quran and Sunna, zakat tax as the basis of Islamic fiscal policy and prohibition of interest.. In Shia Islam, some scholars such as Mahmoud Taleghani, and Mohammad Baqir al-Sadr, have developed an "Islamic economics" emphasizing the uplifting of the deprived masses, a major role for the state in matters such as circulation and equitable distribution of wealth, and ensuring participants in the marketplace are rewarded for being exposed to risk and/or liability. Islamists movements and authors generally describe an Islamic economic system as neither Socialist nor Capitalist, but a "third way" with none of the drawbacks of the other two systems.Islam and Economic Justice: A 'Third Way' Between Capitalism and Socialism?How Do We Know Islam Will Solve the Problems of Poverty and Inequality? History Traditional Islamic concepts having to do with economics included *''zakat'' - the "taxing of certain goods, such as harvest, with an eye to allocating these taxes to expenditures that are also explicitly defined, such as aid to the needy." *''Gharar'' - "the interdiction of chance ... that is, of the presence of any element of uncertainty, in a contract (which excludes not only insurance but also the lending of money without participation in the risks)" *''Riba'' - "referred to as usury" Roy, The Failure of Political Islam Harvard University Press, 1994, p.132 These concepts, like others in Islamic law, came from the "prescriptions, anecdotes, examples, and words of Muhammad, all gathered together and systematized by commentators according to an inductive, casuistic method." Sometimes other sources such as al-urf, (the custom), al-aql (reason) or al-ijma (consensus of the jurists) were employed.Schirazi, Asghar, Constitution of Iran, (1997), p.170 In addition, Islamic law has developed areas of law that correspond to secular laws of contracts and torts. Early reforms under Islam Some argue early Islamic theory and practice formed a "coherent" economic system with "a blueprint for a new order in society, in which all participants would be treated more fairly". Michael Bonner, for example, has written that an "economy of poverty" prevailed in Islam until 13th and 14th century. Under this system God's guidance made sure the flow of money and goods was "purified" by being channeled from those who had much of it to those who had little by encouraging zakat (charity) and discouraging riba (usury/interest) on loans. Bonner maintains Muhammad also helped poor traders by allowing only tents, not permanent buildings in the market of Medina, and not charging fees and rents there.Michael Bonner, "Poverty and Economics in the Qur’an", Journal of Interdisciplinary History, xxxv:3 (Winter, 2005), 391–406 Classical Muslim economic thought ]] To some degree, the early Muslims based their economic analyses on the Qur'an (such as opposition to riba, meaning usury or interest), and from sunnah, the sayings and doings of Muhammad. Perhaps the most well known Islamic scholar who wrote about economics was Ibn Khaldun (1332–1406),Schumpeter (1954) p 136 mentions his his sociology, others, including Hosseini (2003) emphasize him as well who is considered a father of modern economics.I. M. Oweiss (1988), "Ibn Khaldun, the Father of Economics", Arab Civilization: Challenges and Responses, New York University Press, ISBN 0887066984.Jean David C. Boulakia (1971), "Ibn Khaldun: A Fourteenth-Century Economist", The Journal of Political Economy 79 (5): 1105-1118. Ibn Khaldun wrote on economic and political theory in the introduction, or Muqaddimah (Prolegomena), of his History of the World (Kitab al-Ibar). In the book, he discussed what he called asabiyya (social cohesion), which he sourced as the cause of some civilizations becoming great and others not. Ibn Khaldun felt that many social forces are cyclic, although there can be sudden sharp turns that break the pattern.Weiss (1995) p29-30 His idea about the benefits of the division of labor also relate to asabiyya, the greater the social cohesion, the more complex the successful division may be, the greater the economic growth. He noted that growth and development positively stimulates both supply and demand, and that the forces of supply and demand are what determines the prices of goods.Weiss (1995) p31 quotes Muqaddimah 2:276-278 He also noted macroeconomic forces of population growth, human capital development, and technological developments effects on development.Weiss (1995), p. 31, quotes Muqaddimah 2: 272-273 In fact, Ibn Khaldun thought that population growth was directly a function of wealth.Weiss (1995), p. 33 Other important early Muslim scholars who wrote about economics include Abu Hanifah, Abu Yusuf (731-798), Ishaq bin Ali al-Rahwi (854–931), al-Farabi (873–950), Qabus (d. 1012), Ibn Sina (Avicenna) (980–1037), Ibn Miskawayh (b. 1030), al-Ghazali (1058–1111), al-Mawardi (1075–1158), Nasīr al-Dīn al-Tūsī (1201–1274), Ibn Taimiyah (1263–1328) and al-Maqrizi. Economy in the Caliphate During the Muslim Agricultural Revolution, the Caliphate understood that real incentives were needed to increase productivity and wealth and thus enhance tax revenues. A social transformation took place as a result of changing land ownership Zohor Idrisi (2005), The Muslim Agricultural Revolution and its influence on Europe, FSTC. giving individuals of any genderMaya Shatzmiller, p. 263., ethnic or religious background the right to buy, sell, mortgage and inherit land for farming or any other purpose. Based on the Quran, signatures were required on contracts for every major financial transaction concerning agriculture, industry, commerce, and employment. Copies of the contract were usually kept by both parties involved. There are similarities between Islamic economics and leftist or socialist economic policies. Islamic jurists have argued that privatization of the origin of oil, gas, and other fire-producing fuels, agricultural land, and water is forbidden. The principle of public or joint ownership has been drawn by Muslim jurists from the following hadith of the Prophet of Islam: Ibn Abbas reported that the Messenger of Allah said: "All Muslims are partners in three things- in water, herbage and fire." (Narrated in Abu Daud, & Ibn Majah) http://www.muslimtents.com/shaufi/b16/b16_19.htm Anas added to the above hadith, "Its price is Haram (forbidden)" http://nation.ittefaq.com/issues/2009/06/08/news0531.htm Jurists have argued by qiyas that the above restriction on privatization can be extended to all essential resources that benefit the community as a whole. http://www.muslimtents.com/shaufi/b16/b16_19.htm. Aside from similarities to socialism, early forms of proto-capitalism and free markets were present in the Caliphate,The Cambridge economic history of Europe, p. 437. Cambridge University Press, ISBN 0521087090. since an early market economy and early form of merchant capitalism developed between the 8th and 12th centuries, which some refer to as "Islamic capitalism".Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1), p. 79-96 83, 85, 90, 93, 96. A vigorous monetary economy developed based on the circulation of a stable high-value currency (the dinar) and the integration of previously independent monetary areas. Business techniques and forms of business organization employed during this time included early contracts, bills of exchange, long-distance international trade, early forms of partnership (mufawada) such as limited partnerships (mudaraba), and early forms of credit, debt, profit, loss, capital (al-mal), capital accumulation (nama al-mal), circulating capital, capital expenditure, revenue, cheques, promissory notes,Robert Sabatino Lopez, Irving Woodworth Raymond, Olivia Remie Constable (2001), Medieval Trade in the Mediterranean World: Illustrative Documents, Columbia University Press, ISBN 0231123574. trusts (waqf), startup companies,Timur Kuran (2005), "The Absence of the Corporation in Islamic Law: Origins and Persistence", American Journal of Comparative Law 53, p. 785-834 798-799. savings accounts, transactional accounts, pawning, loaning, exchange rates, bankers, money changers, ledgers, deposits, assignments, the double-entry bookkeeping system,Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1), p. 79-96 92-93. and lawsuits.Ray Spier (2002), "The history of the peer-review process", Trends in Biotechnology 20 (8), p. 357-358 357. Organizational enterprises similar to corporations independent from the state also existed in the medieval Islamic world.Said Amir Arjomand (1999), "The Law, Agency, and Policy in Medieval Islamic Society: Development of the Institutions of Learning from the Tenth to the Fifteenth Century", Comparative Studies in Society and History 41, p. 263-293. Cambridge University Press.Samir Amin (1978), "The Arab Nation: Some Conclusions and Problems", MERIP Reports 68, p. 3-14 13. Many of these concepts were adopted and further advanced in medieval Europe from the 13th century onwards.Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", Historical Materialism 15 (1), p. 47-74, Brill Publishers. The concepts of welfare and pension were introduced in early Islamic law as forms of Zakat (charity), one of the Five Pillars of Islam, since the time of the Rashidun caliph Umar in the 7th century. The taxes (including Zakat and Jizya) collected in the treasury (Bayt al-mal) of an Islamic government were used to provide income for the needy, including the poor, elderly, orphans, widows, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to stockpile food supplies in every region in case a disaster or famine occurred. The Caliphate was thus one of the earliest welfare states. (see online) The economy was bolstered by high literacy rates and extended lifespans. The Islamic Empire experienced a growth in literacy, achieving the highest literacy rate in the Middle Ages, comparable to that of Athens in Classical Antiquity but on a larger scale. The widepsread adoption of paper and the emergence of the Maktab and Madrasah educational institutions played a fundamental role in the relatively high literacy rates of the Caliphate. Due to the Muslim Agricultural Revolution as well as improved medical care, the average life expectancy increased under Muslim rule. In contrast to the average lifespan in the ancient Greco-Roman world (22 to 28 years)Life expectancy (sociology) University of Wyoming and medieval Britain (30 years),Time traveller's guide to Medieval Britain the average lifespan in the early Islamic Caliphate was more than 35 years for the lower classes, and much higher than that for the upper classes. The average lifespans of the Islamic scholarly class in particular were 84.3 years in 10th-11th century Iraq and Persia, 72.8 years in the 11th century Middle East, and 69–75 years in 11th century Islamic Spain. Post-colonial era During the modern post-colonial era, as Western ideas, including Western economics, began to influence the Muslim world, some Muslim writers sought to produce an Islamic discipline of economics. Because Islam is "not merely a spiritual formula but a complete system of life in all its walks",The Economic Life of Islam these writers believed that it should logically follow that Islam also had its own economic system unique from and superior to non-Islamic systems. To date, however, there have been no agreement as to the methodological definition and scope of Islamic Economics. In the 1960s and 70s Shia Islamic thinkers worked to develop a unique Islamic economic philosophy with "its own answers to contemporary economic problems." Several works were particularly influential, *''Eslam va Malekiyyat'' (Islam and Property) by Mahmud Taleqani (1951), *''Iqtisaduna'' (Our Economics) by Mohammad Baqir al-Sadr (1961) and *''Eqtesad-e Towhidi'' (The Economics of Divine Harmony) by Abolhassan Banisadr (1978) *''Some Interpretations of Property Rights, Capital and Labor from Islamic Perspective'' by Habibullah Peyman (1979).Bakhash, Shaul, The Reign of the Ayatollahs, Basic Books, c1984, p.167-8Revolutionary Surge and Quiet Demise of Islamic Economics in Iran Al-Sadr in particular has been described as having "almost single-handedly developed the notion of Islamic economics" The Renewal of Islamic Law In their writings Sadr and the other authors "sought to depict Islam as a religion committed to social justice, the equitable distribution of wealth, and the cause of the deprived classes," with doctrines "acceptable to Islamic jurists", while refuting existing non-Islamic theories of capitalism and Marxism. This version of Islamic economics, which influenced the Iranian Revolution, called for public ownership of land and of large "industrial enterprises," while private economic activity continued "within reasonable limits." Bakhash, Shaul, The Reign of the Ayatollahs, Basic Books, c1984, p.172-3 These ideas helped shape the large public sector and public subsidy policies of the Iranian Revolution. In the 1980s and 1990s, as the Islamic revolution failed to reach the per capita income level achieved by the regime it overthrew, and Communist states and socialist parties in the non-Muslim world turned away from socialism, Muslim interest shifted away from government ownership and regulation. In Iran, it is reported that "eqtesad-e Eslami (meaning both Islamic economics and economy) ... once a revolutionary shibboleth, is indubitably absent in all official documents and the media. It disapperared from Iranian political discourse about 15 years ago 1990." But in other parts of the Muslim world the term lived on, shifting form to the less ambitious goal of interest-free banking. Some Muslim bankers and religious leaders suggested ways to integrate Islamic law on usage of money with modern concepts of ethical investing. In banking this was done through the use of sales transactions (focusing on the fixed rate return modes) to achieve similar results to interest. This has been heavily criticised by many modern writers as a means of covering conventional banking with an Islamic facade. In 2008 an economist and former advisor to Tony Blair, Tahir Iqbal, resolved the existing issues in Islamic economics of both providing a fully shariah compliant Islamic political economy (including the problem of government borrowing and mortgages) in his book "what is the sound of an invisible hand clapping", published by maison mascara books. The foundation of this was the quard al hasana (good debt)which when introduced with zakat on all assets sets in place a new framework that solves boom and bust and implies that poverty itself could be stopped using Islamic economics. Traditional approach While many Muslims believe Islamic law is perfect by virtue of its being revealed by God, Islamic law on economic issues was/is not "economics" in the sense of a systematic study of production, distribution, and consumption of goods and services. An example of the traditionalist ulama approach to economic issues is Imam Khomeini's work Tawzih al-masa'il where the term `economy` does not appear and where the chapter on selling and buying (Kharid o forush) comes after the one on pilgrimage. As Olivier Roy puts it, the work "presents economic questions as individual acts open to moral analysis: `To lend interest, on a note from the lender is among the good works that are particularly recommended in the verses of the Quran and the in the Traditions.`" Roy, The Failure of Political Islam Harvard University Press, 1994, p.133 Property The Qur'an states that God is the sole owner of all matter in the heavens and the earth.Nomani and Rahnema quote , , , , Man, however, is God's viceregent on earth and holds God's possessions in trust (amanat). Islamic jurists have divided properties into three categories:Nomani and Rahnema (1994), p. 66-70 *Public property *State property *Private property Public property Public property in Islam refers to natural resources (forests, pastures, uncultivated land, water, mines, oceanic resources etc.) over which all humans have equal right. Such resources are considered the common property of the community. Such property is placed under the guardianship and control of the Islamic state, and can be utilized by any citizen, as long as it does not undermine the right of other citizens over it. Some types of public property can not be privatized under Islamic law. Muhammad's saying that "people are partners in three things: water, fire and pastures", has led some scholars to believe that the privatization of water, energy and agricultural land is not permissible. Other types of public property, such as gold mines, were allowed by Muhammad to be privatized, in return for taxes to the Islamic state. The owner of the previously public property that was privatized has to pay zakat and, according Shiite scholars, khums as well. In general the privatization and nationalization of public property is subject to debate amongst Islamic scholars. Public property thus, eventually, becomes state or private property. State property State property includes certain natural resources, as well as other property that can't immediately be privatized. Islamic state property can be movable, or immovable, can be acquired through conquest, or peaceful means. Unclaimed, unoccupied and heir less properties, including uncultivated land (mawat), can be considered state property. During the life of Muhammad, one fifth of military equipment captured from the enemy in the battlefield was considered state property. During his reign, Umar (on the recommendation of Ali) considered conquered land to be state property, instead of private property (as was usual practice). The reason for this was that privatizing this property would concentrate resources in the hands of a few, and prevent this property from being used for the general good of the community. The property remained under the occupation of the cultivators, but the taxes collected on it went to the state treasury. Muhammad said "Old and fallow lands are for God and His Messenger (i.e. state property), then they are for you". Jurists draw from this the conclusion that, ultimately, private ownership takes over state property. Private property There is consensus amongst Islamic jurists and social scientists that Islam recognizes and upholds the individual's right to private ownership. The Qur'an extensively discusses taxation, inheritance, prohibition against stealing, legality of ownership, recommendation to give charity and other topics related to private property. Islam also guarantees the protection of private property by imposing stringent punishments on thieves. Muhammad said that he who dies defending his property was like a martyr.Nomani and Rahnema (1994), p. 71-77 Islamic economists have classified the acquisition of private property into three categories: involuntary, contractual and non-contractual. Involuntary means are inheritance, bequests, and gifts. Non-contractual is acquisition involves the collection and exploitation of natural resources that have not previously been claimed as private property. Contractual acquisition includes activities such as trading, buying, renting, hiring labor etc. A tradition attributed to Muhammad, with which both Sunni and Shi'ite jurists agree, in cases where the right to private ownership causes harm to others, then Islam is in favor of curtailing the right in those cases. Maliki and Hanbali jurists argue that if private ownership endangers public interest, then the state can limit the amount an individual is allowed to own. This view, however, is debated by others. Market Islam accepts markets as the basic co-ordinating mechanism of the economic system. Islamic teaching holds that the market, through perfect competition, allows consumers to obtain desired goods, producers to sell their goods, at a mutually acceptable price.Nomani and Rahnema (1994), p. 55-58 The three necessary conditions for an operational market are said to be upheld in Islamic primary sources: *Freedom of exchange: the Qur'an calls on believers to engage in trade, and rejects the contention that trade is forbidden.Nomani and Rahnema cite , and *Private ownership (see above). *Security of contract: the Qur'an calls for the fulfillment and observation of contracts.Nomani and Rahnema cite , , , and The longest verse of the Qur'an deals with commercial contracts involving immediate and future payments.Nomani and Rahnema cite . Capitalist market economy The origins of capitalism and free markets can be traced back to the Islamic Golden Age and Muslim Agricultural Revolution, where an early market economy and forms of merchant capitalism took root between the 8th–12th centuries, which some refer to as "Islamic capitalism".Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1), pp. 79–96 83, 85, 90, 93, 96. A vigorous monetary economy was created by Muslims on the basis of the expanding levels of circulation of a stable high-value currency (the dinar) and the integration of monetary areas that were previously independent. Business techniques and forms of business organisation applied during this time included contracts, bills of exchange, long-distance international trade forms of partnership (mufawada) such as limited partnerships (mudaraba), and forms of credit, debt, profit, loss, capital (al-mal), capital accumulation (nama al-mal), circulating capital, capital expenditure, revenue, cheques, promissory notes, trusts (see Waqf), startup companies,Timur Kuran (2005), "The Absence of the Corporation in Islamic Law: Origins and Persistence", American Journal of Comparative Law 53, pp. 785–834 798–9. savings accounts, transactional accounts, pawning, loaning, exchange rates, bankers, money changers, ledgers, deposits, assignments, the double-entry bookkeeping system,Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1), pp. 79–96 92–3. and lawsuits. Organizational enterprises similar to corporations independent from the state also existed in the medieval Islamic world, while the agency institution was also introduced.Said Amir Arjomand (1999), "The Law, Agency, and Policy in Medieval Islamic Society: Development of the Institutions of Learning from the Tenth to the Fifteenth Century", Comparative Studies in Society and History 41, pp. 263–93. Cambridge University Press.Samir Amin (1978), "The Arab Nation: Some Conclusions and Problems", MERIP Reports 68, pp. 3–14 13. Many of these early capitalist concepts were adopted and further advanced in medieval Europe from the 13th century onwards.Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", Historical Materialism 15 (1), pp. 47–74, Brill Publishers. The systems of contract relied upon by merchants was very effective. Merchants would buy and sell on commission, with money loaned to them by wealthy investors, or a joint investment of several merchants, who were often Muslim, Christian and Jewish. Recently, a collection of documents was found in an Egyptian synagogue shedding a very detailed and human light on the life of medieval Middle Eastern merchants. Business partnerships would be made for many commercial ventures, and bonds of kinship enabled trade networks to form over huge distances. Networks developed during this time enabled a world in which money could be promised by a bank in Baghdad and cashed in Spain, creating the cheque system of today. Each time items passed through the cities along this extraordinary network, the city imposed a tax, resulting in high prices once reaching the final destination. These innovations made by Muslims and Jews laid the foundations for the modern economic system. Interference Islam promotes a market free from interferences such as price fixing and hoarding. Government intervention, however, is tolerated under specific circumstances. Islam prohibits the fixation of a price by a handful of buyers or sellers who have become dominant in the market. During the days of Muhammad, a small group of merchants used to meet agricultural producers outside the city and bought the entire crop, thereby gaining monopoly over the market. The produce was later sold at a higher price within the city. Muhammad condemned this practice since it caused injury both to the producers (who in the absence of numerous customers were forced to sell goods at a lower price) and the inhabitants of Medina. The above mentioned reports are also used to justify the argument that the Islamic market is characterized by free information. Producers and consumers should not be denied information on demand and supply conditions. Producers are expected to inform consumers of the quality and quantity of goods they claim to sell. Some scholars hold that if an inexperienced buyer is swayed by the seller, the consumer may nullify the transaction upon realizing the seller's unfair treatment. The Qur'an also forbids discriminatory means of transaction.Nomani and Rahnema cite , , . They also point out that a chapter is devoted to such fraudulent practices: Government interference in the market is justified in exceptional circumstances, such as the protection of public interest. Under normal circumstances, government non-interference should be upheld. When Muhammad was asked to set the price of goods in a market he responded, "I will not set such a precedent, let the people carry on on with their activities and benefit mutually." Islamic insurance Some Muslims believe insurance is unnecessary, as society should help its victims. Muslims can no longer ignore the fact that they live, trade and communicate with open global systems, and they can no longer ignore the need for banking and insurance. Aly Khorshid demonstrates how initial clerical apprehensions were overcome to create pioneering Muslim-friendly banking systems, and applies the lessons learnt to a workable insurance framework by which Muslims can compete with non-Muslims in business and have cover in daily life. The book uses relevant Quranic and Sunnah extracts, and the arguments of pro- and anti-insurance jurists to arrive at its conclusion that Muslims can enjoy the peace of mind and equity of an Islamic insurance scheme. Banking Interest The Quran (3: 130) clearly condemns what it calls by the Arabic term "riba," usually translated "interest": "O, you who believe! Devour not riba, doubled and redoubled, and be careful of Allah; haply so you will prosper." Debt arrangements Most Islamic economic institutions advise participatory arrangements between capital and labor. The latter rule reflects the Islamic norm that the borrower must not bear all the cost of a failure, as "it is God who determines that failure, and intends that it fall on all those involved." Conventional debt arrangements are thus usually unacceptable - but conventional venture investment structures are applied even on very small scales. However, not every debt arrangement can be seen in terms of venture investment structures. For example, when a family buys a home it is not investing in a business venture - a person's shelter is not a business venture. Similarly, purchasing other commodities for personal use, such as cars, furniture, and so on, cannot realistically be considered as a venture investment in which the Islamic bank shares risks and profits for the profits of the venture. Money changers Due to religious sanctions against odious debt, Tamil Muslims have historically been money changers (not money lenders) throughout South and South East Asia.Historical dominance on money changing business Natural capital Perhaps due to resource scarcity in most Islamic nations, this form of economics also emphasizes limited (and some claim also sustainable) use of natural capital, i.e. producing land. These latter revive traditions of haram and hima that were prevalent in early Muslim civilization. Welfare Social welfare, unemployment, public debt and globalization have been re-examined from the perspective of Islamic norms and values. Islamic banks have grown recently in the Muslim world but are a very small share of the global economy compared to the Western debt banking paradigm. It remains to be seen if they will find niches - although hybrid approaches, e.g. Grameen Bank which applies classical Islamic values but uses conventional lending practices, are much lauded by some proponents of modern human development theory. Islamic stocks In June 2005 Dow Jones Indexes, New York, and RHB Securities, Kuala Lumpur, teamed up to launch a new "Islamic Malaysia Index" —a collection of 45 stocks representing Malaysian companies that comply with a variety of Sharia-based criteria. Three variables (the total debt of an indexed company, its total cash plus interest-bearing securities and its accounts receivables) must each be less than 33% of the trailing 12-month average capitalization, for example. Islamic bonds, or sukuk, use asset returns to pay investors to comply with the religion’s ban on interest and are currently traded privately on the over-the-counter market. In late December 2009 Bursa Malaysia announced it was considering enabling individuals to trade Shariah- compliant debt on its exchange as part of a plan to attract new investors to the securities . Popularity and availability Today there are many financial institutions, even in the Western world, offering financial services and products in accordance with the rules of the Islamic finance. For example, legal changes introduced by Chancellor Gordon Brown in 2003, have enabled British banks and building societies to offer so-called Muslim mortgages for house purchase. In 2004 the UK's first stand alone Sharia'a compliant bank was launched, the Islamic Bank of Britain. Several banks offer products and services to its UK customers that utilise the Islamic financial principles; such as Mudaraba, Murabaha, Musharaka and Qard. The Islamic finance sector was worth between 300 and 500 billion dollars (237 and 394 billion euros) as of September 2006, compared with 200 billion dollars in 2004. The number of Islamic retail banks and investment funds number in their hundreds and many Western financial institutions offer products that comply with Sharia law, including Citigroup, Deutsche Bank, HSBC, Lloyds TSB and UBS. In 2008, at least $500 billion in assets around the world were managed in accordance with Sharia, or Islamic law, and the sector was growing at more than 10% per year. Islamic finance seeks to promote social justice by banning exploitative practices. In reality, this boils down to a set of prohibitions—on paying interest, on gambling with derivatives and options, and on investing in firms that make pornography or pork.Islamic Finance, Forbes (April 21, 2008) Business Method Patents With the recent ability to patent new methods of doing business in the United States, a small number of patent applications have been filed on methods for providing Sharia compliant financial services. These pending patent applications include: * Declining balance co-ownership financing arrangement. This discloses an allegedly Sharia compliant financing arrangement for home purchases and refinances that does not involve the payment of interest. * Controlling a Computer System Enabling Sharia-Compliant Financing. This discloses an improved computer system for carrying out Sharia compliant financial transactions. Views Sohrab Behada's study argued that the economic system proposed by Islam is essentially a capitalist one.Sohrab Behada, "Property Rights in Contemporary Islamic Economic Thought, Review of Social Economy, Summer 1989 v.47, (pp.185-211) Criticism Its popularity notwithstanding, critics of Islamic economics have not been sparing. It has been attacked for its alleged "incoherence, incompleteness, impracticality, and irrelevance;" Kuran, "The Economic Impact of Islamic Fundamentalism," in Marty and Appleby Fundamentalisms and the State, U of Chicago Press, 1993, p.302-41 driven by "cultural identity" rather than problem solving."The Discontents of Islamic Economic Mortality" by Timur Kuran, American Economic Review, 1996, p.438-442 Others have dismissed it as "a hodgepodge of populist and socialist ideas," in theory and "nothing more than inefficient state control of the economy and some almost equally ineffective redistribution policies," in practice.Halliday, Fred, 100 Myths about the Middle East, Saqi Books, 2005 p.89 In a political and regional context where Islamist and ulema claim to have an opinion about everything, it is striking how little they have to say about this most central of human activities, beyond repetitious pieties about how their model is neither capitalist nor socialist. Interest-bearing (Riba) and speculation-involving (Gharar) trading are clearly prohibited by explicit canonical texts. Based on this prohibition, presumably financial structures of all the Islamic products should be interest and speculation free. Nevertheless, some new empirical studies hypothesize that “Islamic finance products’ structure is based on the Islamic prohibitions; however, these products’ risk management is still based on revoking the underlying prohibitions”. The most prominent case here is Islamic financial market products such as, inter alia, Salam and Istisna’ these products are used are hedging methods for the Islamic bonds known as Sukuk. If Sukuk’s originator or investors wish to hedge against interest rate or exchange rate risks, then they have to use one of the former methods. These methods as they originally mimic the conventional risk management practice, should involve either interest-bearing or speculation-bearing trading or even both. There have been some innovations that try to avoid falling in interest-based and/or speculation based transactions. Parallel Salam and synthetics are some of the more recent. See also *Fiqh *Law and economics *Ibn Khaldun *Muhammad Taqi Usmani *AAB Chartered Accountants *Umar Chapra *Islamic philosophy **Early Islamic philosophy **Modern Islamic philosophy *Islamization of knowledge *Islamic democracy *Green economics *Economy of the OIC *Islamic banking *Monzer Kahf *Aly Khorshid *Waleed Ahmad J. Addas *Global Islamic Finance magazine Notes Bibliography *Al-Amine, Muhammad al-Bashir Muhammad, "Risk Management in Islamic Finance: An Analysis of Derivatives Instruments in Commodity Markets", Leiden: Brill, 2008. (ISBN 9789004152465) *Muhammad Nejatullah Siddiqui, Muslim Economic Thinking, (Islamic Foundation, Leicester, UK) *Syed Nawab Haider Naqi, Ethics and Economics: An Islamic Synthesis, (Islamic Foundation, Leicester, UK) *M. Umar Chapra, Islam and the Economic Challenge, (Islamic Foundation, Leicester, UK) * Aly KhorshidAly Khorshid, Islamic finance Scholar and Shari'ah Consultant, ( Elite Horizon Economic Consultancy, UK) *Angelo M. Venardos, Islamic Banking & Finance in South-East Asia: Its Development & Future, (World Scientific Publishing, Singapore) *Abbas Mirakhor, Theoretical Studies in Islamic Banking and Finance, (Islamic Publications International) * Islamic Banking, Finance & Economics by Maryam Ayaz *Fatwa Dewan Syariah Nasional - Majelis Ulama Indonesia Fatwa about many issues in Islamic Economics *Islamic Economics book list *Islamic Banking references *Islamic Banking references (GDRC) *Bakhash, Shaul, The Reign of the Ayatollahs, Basic Books, c1984 *Behdad, Sohrab and Farhad Nomani, eds., Islam and the Everyday World: Public Policy Dilemmas, Routledge, 2006, ISBN 0-415-36823-5 *Addas, Waleed. [http://mpra.ub.uni-muenchen.de/8264/ Methodology of Economics: Secular versus Islamic], IIUM, 2008, ISBN 978-983-3855-28-5 *Halliday, Fred, 100 Myths about the Middle East, Saqi Books, 2005 * *Roy, Olivier, The Failure of Political Islam Harvard University Press, 1994 Torts * A. Basir Bin Mohamad. "The Islamic Law of Tort: A Study of the Owner and Possessor of Animals with Special Reference to the Civil Codes of the United Arab Emirates, Lebanon, Tunisia, Morocco, Sudan and Iraq" in Arab Law Quarterly V.16, N.4 2001 * __________. "Vicarious Liability: A Study of the Liability of the Guardian and his Ward in the Islamic Law of Tort" Arab Law Quarterly V. 17, N.1 2002 * Immanuel Naveh. "The Tort of Injury and Dissolution of Marriage at the Wife's Initiative in Egyptian Mahkamat al-Naqd Rulings" in Islamic Law and Society Volume 9, Number 1, 2002 * Islamic law of tort Liaquat Ali Khan Niazi, 1988 * An outline of Islamic law of tort Abdul-Qadir Zubair, 1990 Further reading *[http://www.nbr.org/publications/element.aspx?id=344 "Understanding Islamic Finance: Local Innovation and Global Integration," by Shamshad Akhtar et al (Asia Policy, July 2008)] *Riba, Interest and Six Hadiths: Do We Have a Definition or a Conundrum? by Dr. Mohammad Omar Farooq *The Challenge of Poverty and the Poverty of Islamic Economics by Dr. Mohammad Omar Farooq *Toward Defining and Understanding Riba by Dr. Mohammad Omar Farooq *The Riba-Interest Equation and Islam: Reexamination of the Traditional Arguments by Dr. Mohammad Omar Farooq *Mahmoud el-Gamal, Rice University, Houston, Texas, "An Economic Explanation of the Prohibition of Riba in Classical Islamic Jurisprudence." *Methodology of Economics: Secular versus Islamic *State Of Knowledge And Development Of Islamic Economics External links *World Datbase for Islamic Banking and Finance *Putting Faith into Finance article on Islamic finance from HSBC perspective *Muslim mortgages in Britain *Alternative energy for funds Extract from Jane's Transport Finance about Islamic finance, 29 August 2006 *Dow Jones Islamic Market indexes *Global Islamic Finance magazine *Islamic Finance Navigator (Family Offices, Banks, Takaful, Law Firms...) 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